I have inherited $10k and I don't know what I should do with it. I'm 30 years old and plan on retiring when I'm 57 and receive a state pension. My state pension will pay 75% of my salary when I retire and I have opened up an IRA (and contribute monthly) in order to help supplement the remaining 25% of my salary at retirement.
I have $105,000 remaining on my mortgage at 3.6%. I have no other debt other than the mortgage. I currently have $13,000 in savings.
Should I take the inherited $10k and put it towards my mortgage? (I will probably stay in this house for another 10 years or so) Or is there something else I should be doing to get a higher return?

Tue Jun 28, 2016 2:55 pm

oldguySenior Member

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Location: arizona

quote: Should I take the inherited $10k and put it towards my mortgage? (I will probably stay in this house for another 10 years or so) Or is there something else I should be doing to get a higher return?

In general, a 30-yr-old should not be investing at a guaranteed 3.6%. (Unless you are extremely risk averse.) Most of us are given about 30 yrs for "wealth-building" - where we take some risk to out-pace inflation. And then we shift toward "wealth preservation" where we invest in low-risk funds (such as CDs, savings accounts, and 3.6% mortgages).

The Law of Investing - risk and return are directly proportional. Low risk products (CDs, savings, etc) are designed for safe storage of money, the interest normally offsets inflation, but doesn't build purchasing power.
Moderate risk products (mutual funds, index funds, etc) are designed to grow wealth, usually at about 11%, minus inflation. So your purchasing power would grow at about 9%/yr.

Your $10k, at 11%/yr, would be about $170,000. Of course it doesn't stop growing just cuz you retire - I've been retired for 18 years, I've got funds that have doubled twice since I retired. (The Rule of 72 - "money doubles when the years times the interest are 72" - eg, at 9% money doubles in 8 years). So that $170k would be $680k when you are my age. [/b]

Tue Jun 28, 2016 3:54 pm

wilsoncowdenNew Member

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Location: Northern Ireland

Re: Inherited $10k

quote:Originally posted by jar6531I have inherited $10k and I don't know what I should do with it. I'm 30 years old and plan on retiring when I'm 57 and receive a state pension. My state pension will pay 75% of my salary when I retire and I have opened up an IRA (and contribute monthly) in order to help supplement the remaining 25% of my salary at retirement.
I have $105,000 remaining on my mortgage at 3.6%. I have no other debt other than the mortgage. I currently have $13,000 in savings.
Should I take the inherited $10k and put it towards my mortgage? (I will probably stay in this house for another 10 years or so) Or is there something else I should be doing to get a higher return?

Please read what "oldguy" wrote in another post I've just replied to . Unfortunately his view of gold values has been a major disadvantage to his wealth. Lets pretend his grandfather had bequeathed him $100,000 in 1922 that same cash in 2016 has lost 98% of its value. Whereas had he exchanged the $100,000 for pure gold the value today is over $4.6million. So the cash would buy only $2,000 worth of products at 2016 value whereas the gold would buy the same and possibly more than it would have bought in 1922.
There are much better ways of generating high returns in 2016 and you definitely should consider long term planning. Please get in touch with me to discover how you can quickly pay off that mortgage and secure your future wealth.

Sat Jul 09, 2016 3:57 pm

oldguySenior Member

Cash: $ 732.85

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Location: arizona

quote: Lets pretend his grandfather had bequeathed him $100,000 in 1922 that same cash in 2016 has lost 98% of its value. Whereas had he exchanged the $100,000 for pure gold the value today is over $4.6million.

That $100k in 1912 is worth $1,256,227,784 is 2016. A billionaire. (That $4.6 million is merely a rounding error on $1,256 million.)

Sat Jul 09, 2016 10:16 pm

jessaragenNew Member

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Location: Manchester

You might consider the idea of investing in a real estate investment fund. It has a low entry threshold which starts from $1K.

Wed Sep 07, 2016 8:54 am

ken-do-nimFull Member

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Location: Mansfield, MA

Re: Inherited $10k

quote:Originally posted by jar6531I have inherited $10k and I don't know what I should do with it. I'm 30 years old and plan on retiring when I'm 57 and receive a state pension. My state pension will pay 75% of my salary when I retire and I have opened up an IRA (and contribute monthly) in order to help supplement the remaining 25% of my salary at retirement.
I have $105,000 remaining on my mortgage at 3.6%. I have no other debt other than the mortgage. I currently have $13,000 in savings.
Should I take the inherited $10k and put it towards my mortgage? (I will probably stay in this house for another 10 years or so) Or is there something else I should be doing to get a higher return?

First off, my condolences to your relative that passed on.

Second, do you have any children? My first thought is to put the money into a 529 plan for them to pay for college.

Note: for most people, 75% of their final income is all they'll need in retirement. A pension, wow, that is an awesome perk.

I see no reason to pay off your mortage. 3.6% is a low rate to begin with, and the interest is tax deductible, and your are only 30. It will be gone by the time you retire, which is why you don't need as much income when you are retired as you do now.